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Posts Tagged ‘Digital Platforms’

Latest Digital Development Outputs (Data, Economy, Health, Platforms, Water) from CDD, Manchester

Using SmartphoneRecent outputs – on Data-for-Development; Digital Economy; Digital Health; Digital Platforms; Digital Water – from Centre for Digital Development researchers, University of Manchester:

DATA-FOR-DEVELOPMENT

Strengthening the Skills Pipeline for Statistical Capacity Development to Meet the Demands of Sustainable Development: Implementing a Data Fellowship Model in Colombia” (open access) by Pete Jones, Jackie Carter, Jaco Renken & Magdalena Arbeláez Tobón, considers the importance of quantitative data skills development implied by the UN Sustainable Development Goals. The success of a partnership programme in the UK is used to explore how ‘data fellowships’ can fulfil some of the unmet capacity needs of the SDGs in a developing country context, Colombia.

Building Information Modelling Diffusion Research in Developing Countries” (open access) by Samuel Adeniyi Adekunle, Obuks Ejohwomu & Clinton Ohis Aigbavboa undertakes a literature review – including current and future research trends – on the adoption of building information modelling in developing countries.

DIGITAL ECONOMY / PLATFORMS

Conceptualising Digital Platforms in Developing Countries as Socio-Technical Transitions” (open read access) by Juan Erasmo Gomez-Morantes, Richard Heeks & Richard Duncombe demonstrates how the multi-level perspective approach can be used to analyse the lifecycle of digital platforms: the process of innovation, rapidity of scaling, and development impacts relating to resource endowments, institutional formalisation, and shifts in power.

Digital Platforms and Institutional Voids in Developing Countries” (open access) by Richard Heeks, Juan Erasmo Gomez-Morantes, Brian Nicholson and colleagues from the Fairwork project, analyses how digital platforms change markets through their institutional actions.  Using the example of ride-hailing, it finds platforms have formed a market that is more efficient, effective, complete and formalised.  At the same time, though, they have institutionalised problematic behaviours and significant inequalities.

Navigating a New Digital Era Means Changing the World Economic Order” (open access) by Shamel Azmeh, discusses the implications of digital shifts for global economic governance.

DIGITAL HEALTH

Cost-Effectiveness of a Mobile Technology-Enabled Primary Care Intervention for Cardiovascular Disease Risk Management in Rural Indonesia” by Gindo Tampubolon and colleagues demonstrates how to determine the economic impact of m-health.  It calculates the cost-effectiveness of a mobile-based health intervention at c.US$4,300 per disability-adjusted life year averted and US$3,700 per cardiovascular disease event avoided.

Delivering Eye Health Education to Deprived Communities in India through a Social Media-Based Innovation” by Chandrani Maitra & Jenny Rowley aims to develop understanding of the benefits of, and the challenges associated with the use of social media to disseminate eye health information in deprived communities in India.

Using a Social Media Based Intervention to Enhance Eye Health Awareness of Members of a Deprived Community in India” (open access) by Chandrani Maitra & Jennifer Rowley reports on a WhatsApp-based intervention to promote eye health communication in deprived settings. This research highlights the potential benefits of WhatsApp in increasing awareness on eye problems, amongst deprived communities where the disease burden remains very high.

DIGITAL WATER

Digital Innovations and Water Services in Cities of the Global South: A Systematic Literature Review” (open access) by Godfred Amankwaa, Richard Heeks & Alison Browne reviews the literature on digital and water in Southern cities.  It summarises findings to date on implementation and impact and sets out the future research agenda.

A Better Way to Research Digital Platforms

Juan Paper Word CloudIn a new European Journal of Development Research paper – “Conceptualising Digital Platforms in Developing Countries as Socio-Technical Transitions” – I and my co-authors argue that there is a better way to research digital platforms.

Digital platforms play an ever-growing role within international development, and a body of research has emerged as a result.  This research offers valuable insights but we find three lacunae:

– Current work collectively identifies a whole set of factors at micro-, meso- and macro-levels that shape the trajectory of digital platforms.  But no research to date can encompass all of the factors and levels.

– Current work has been narrow and a-historical: it analyses the platform but not the existing ways of organising or delivering the particular social, economic or political activity that the platform competes with.

– Current work looks at either implementation and growth of platforms, or at their impact, but not both.  Yet implementation, scaling and impact of platforms are inextricably intertwined.

Our paper therefore uses a different and more holistic approach.  Understanding digital platforms as socio-technical transitions, it uses the multi-level perspective (MLP: see summary diagram below) as its analytical framework.

Using this framework, it analyses a successful ride-hailing platform – EasyTaxi in Colombia.  Although there were some challenges in applying the MLP framework, it addressed the three shortcomings of earlier work:

– It covers the broad range of factors that shape platforms at micro-, meso- and macro-level.

– By focusing on transition, it encompasses both the before and after of platform introduction.

– It analyses the platform lifecycle from initial innovation, though implementation and growth, to impact.

Thus, for example, the MLP explains how prior context and profile of traditional taxi driving created the landscape of infrastructure and incentives behind rapid scaling of the platform.  It also explains development impact: how resource endowments shifted between stakeholders; the formation and formalisation of institutional forces; and the changing distribution of power in the market.

On this basis, we recommend use of the multi-level perspective to researchers wanting to fully understand implementation and impact of digital platforms.

Digital Platforms as Institutions

platforms-as-institutionsHow should we understand digital platforms from an institutional perspective?

The paper, “Digital Platforms and Institutional Voids in Developing Countries”, suggests a four-layer model of institutional forms, and illustrates this using ride-hailing platforms as an example.

Layer 1: Digital Institutions.  Platforms themselves are institutions into which digitised routines and rules have been designed based on the digital affordances of the platform. Ride-hailing examples include algorithmic decision-making such as driver—customer matching, or price setting.

Layer 2: Digitally-Enabled Institutions.  Some institutional functions rely on digitised routines and rules within the platform but involve human intermediation.  Ride-hailing examples include checks on driver credentials for market entry, or adjudication of deactivation decisions.

Layer 3: Business Model Institutions.  These are broader rules and routines determined by the platform company as part of its business model, which govern participation in the platform but which exist outwith the digital platform.  Ride-hailing examples include control over vehicle entry into the market, determination of driver employment status, or setting the balance of supply and demand.

Layer 4: Stakeholder-Relation Institutions.  These are the connections or disconnections to other market or domain institutions.  Ride-hailing examples include relations to external stakeholders such as government agencies and trade unions.

Analysis of field evidence from Colombia and South Africa suggests that the first two types of institution are associated with the filling of prior institutional voids, and with market improvements.  The latter two institutional forms are more related to the maintenance, expansion or creation of institutional voids, and to market inequalities.

We look forward to further work applying and revising this institutional model of platforms.

How Platforms Change Markets: The Lens of “Institutional Voids”

Void

Do digital platforms change markets for better or worse?

To help understand this, we used the lens of institutional voids in the World Development paper, “Digital Platforms and Institutional Voids in Developing Countries”.  This argues that markets don’t work properly because they have institutional shortcomings or voids: inadequate provision of information, limited matching of buyers and sellers, poor management of transactions, ineffective market regulation, etc.

A promise of digital platforms is that they will fill these voids and change markets for the good.  We investigated this using evidence from Colombia and from the South Africa Fairwork project on taxi markets before and after the advent of three e-hailing platforms: Bolt, EasyTaxi and Uber.

The “before” picture was far from perfect.  Institutional voids led to markets with problems including high costs, crime, insecurity, opportunism, informality and discrimination.  As predicted, the gig economy platforms filled some of the institutional voids that led to this profile.  This reduced costs and risks for both drivers and passengers, improved vehicle and service quality, and enabled employment for those excluded from the traditional market.

Yet, in contrast to past research on business and institutional voids in the global South, we found that void-filling is not all that platforms companies do.  They also maintain some voids, such as lack of information and lack of formal employment status for drivers.  They expand some voids, such as lack of information available to government.  And they create some voids by circumventing the regulatory roles performed by government agencies and driver collective bodies.

The core impact of these additional strategies is to increase the relative power of the platform company vis-à-vis other market stakeholders and to make the market much more unequal.  Going far beyond the typical role of business, platform companies have internalised the institutions for the entire gamut of market functions; collapsing an entire organisational field into themselves.  The previously-distributed and -dissipated institutional power that the platform companies have concentrated into themselves is thus unprecedented, particularly given the duopolistic nature of the markets that are often created.

Filling institutional voids is not wholly beneficial – our research also identified problems caused by the digitalisations and formalisations that platforms bring.  But our key recommendation is a need to identify and address the voids that these companies retain or make.  Actions needed include information provision to address customer–driver asymmetries; revitalised state control over market supply–demand imbalance; new legislation to address lack of employment rights for workers; and more effective worker collectivisation.

Our research represents a novel insight into the relation between platforms, institutions and markets, and we look forward to further work applying these ideas to other sectors and contexts.

Digital Platforms as Development Infrastructure

20 April 2021 1 comment
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I’m going to argue here that digital platforms should be understood as development infrastructure[1].

In recent years, there’s been a renewed emphasis on the value and role of infrastructure in international development[2].  Official development assistance for infrastructure has therefore risen but there remains a significant infrastructure financing gap[3].

It may be something of an exaggeration to say, as Paul Collier does, that “the west’s aid agencies ‘pulled out of infrastructure long ago, and started financing social stuff instead. That’s important, but there’s a need to get back to financing the basic [physical and organisational] infrastructure’ because ‘without it countries can’t develop’”[4].  However, while western agencies are still funding infrastructure, it is certainly true that China particularly has stepped in to try to fill the gap left by lack of western funding for development infrastructure; especially via its Belt-and-Road initiative[5].  This gap-filling includes digital infrastructure.

When we think of digital and infrastructure, the focus has been on telecommunications: fibre-optic cabling, mobile networks and the like.  But digital platforms should also be seen as infrastructure.  As development processes digitise and dematerialise, platforms become the “infra-structure” for society: lying beneath and increasingly forming the foundation and site for economic, social and political activity.

Platforms store development assets, just like a grain silo.  Platforms transport development assets, just like a road or railway.  Platforms import and export development assets, just like a port.  Platforms enable transactions of development assets, just like a marketplace.

Digital platforms thus perform the developmental functions not just of physical but also of institutional infrastructure.  For example, as marketplaces, they combine within themselves the institutional infrastructure functions of participant aggregation and certification, transaction facilitation, payment and regulation[6].

The Chinese state has recognised this.  Its Digital Silk Road initiative funds traditional digital infrastructure but it also encompasses support for the spread of Chinese digital platforms to low- and middle-income economies of the global South[7].  These platforms are then becoming a key part of national economic infrastructure in these countries[8]. Will western governments recognise platforms’ infrastructural importance to development?  And, if so, how should and will they respond?


[1] Graphic: https://e.huawei.com/en/publications/global/ict_insights/201810161444/analysts/201906101000

[2] Bhattacharya, A., Romani, M. & Stern, N. (2012) Infrastructure for Development: Meeting the Challenge, London School of Economics; Donaubauer, J., Meyer, B., & Nunnenkamp, P. (2016) Aid, infrastructure, and FDIWorld Development78, 230-245; DFID (2020) International Development Infrastructure Commission Recommendations Report, Department for International Development, UK

[3] UNCTAD (2020) Official international assistance plays a key role in financing for sustainable development, SDG Pulse

[4] Hellowell, M. & Wakdok, S. (2021) Disaster relief, Prospect, March, 48-51

[5] Huang, Y. (2016) Understanding China’s Belt & Road initiativeChina Economic Review40, 314-321.

[6] Heeks, R., Eskelund, K., Gomez-Morantes, J. E., Malik, F., & Nicholson, B. (2020) Digital Labour Platforms in the Global South: Filling or Creating Institutional Voids?, Working Paper no.86, Centre for Digital Development, University of Manchester, UK

[7] Bora, L. Y. (2020) Challenge and perspective for Digital Silk RoadCogent Business & Management7(1), 1804180; Choudary, S.P. (2020) China’s country-as-platform strategy for global influence, TechStream, 19 Nov

[8] Keane, M., & Yu, H. (2019) A digital empire in the making: China’s outbound digital platformsInternational Journal of Communication13, 4624-4641.

Latest Digital Development Outputs (Data, Humanitarianism, Labour, Platforms) from CDD, Manchester

Recent outputs – on Data-for-Development; Digital Humanitarianism; Digital Labour; Digital Platforms – from Centre for Digital Development researchers, University of Manchester:

DATA-FOR-DEVELOPMENT

The Rise of the Data Economy and Policy Strategies for Digital Development” (open access) by Shamel Azmeh, Christopher Foster & Ahmad Abd Rabuh, expands on policy debates around digital development.  It examines the emergence of the data economy and potentials of strategic policy and/or industrial policy in the global South.  Based on a global policy analysis, it identifies four key “policy pathways” by which countries can look to strategically capture value in the data economy.

DIGITAL HUMANITARIANISM

Digital Innovation by Displaced Populations: A Critical Realist Study of Rohingya Refugees in Bangladesh” by Faheem Hussain, P.J. Wall & Richard Heeks, uses a critical realist approach to understand the three mechanisms the underpin digital innovation by Rohingya refugees.

Lessons On The Digital World From The Charity Sector: The Corporate World Has A Lot To Learn” (open access) by Brian Nicholson, Lisa Kidston, Cris Sachikoyne & Dane Anderton, argues that African charitable organisations and those like the national Citizens Advice in England and Wales are leading the way when it comes to demonstrating exemplary digital leadership.

DIGITAL LABOUR AND DEVELOPMENT

Competing Institutional Logics in Impact Sourcing” by Fareesa Malik & Brian Nicholson, draws on the concepts of institutional logics to  present a case study of a USA-based IT outsourcing vendor “AlphaCorp” practising impact sourcing in a Pakistan subsidiary. The findings show that in cases where actors are located in diverse institutional contexts, competing interests determine the respective priority given to the welfare and market logics.

Digital Labour Platforms in Pakistan: Institutional Voids and Solidarity Networks” by Fareesa Malik, Richard Heeks, Silvia Masiero & Brian Nicholson, conceptualises the theoretical link between labour platforms and socio-economic development drawing on the notion of institutional voids and empirical fieldwork in Pakistan.

Risks and Risk-Mitigation Strategies of Gig Economy Workers in the Global South” by Tatenda Mpofu, Pitso Tsibolane, Richard Heeks & Jean-Paul Van Belle, analyses three strategies (platform-, driver- and driver group-led) that seek to mitigate the risks of ride-hailing work in Cape Town.

The Fairwork Foundation: Strategies for Improving Platform Work in a Global Context” (open access) by Mark Graham, Jamie Woodcock, Richard Heeks, Paul Mungai, Jean-Paul Van Belle, Darcy du Toit, Sandra Fredman, Abigail Osiki, Anri van der Spuy & Six M. Silberman, introduces the work of the Fairwork Foundation to rank and compare gig work platforms against a set of five decent work principles.

DIGITAL PLATFORMS AND DEVELOPMENT

Analysing Urban Platforms and Inequality Through a ‘Platform Justice’ Lens” by Richard Heeks & Satyarupa Shekhar, introduces a model of “platform justice” through which to analyse the impact of urban digital platforms.

Competing Logics: Towards a Theory of Digital Platforms for Socio-economic Development” by Silvia Masiero & Brian Nicholson, seeks to contribute to the nascent literature on platforms in development, unpacking a human-centred development logic as an alternative to the market logic that animates most of the platforms discourse and relying on it to lay the foundations for an emerging theory of platforms for development.

Digital Platforms, Surveillance and Processes of Demoralization” by Sung Chai, Brian Nicholson, Robert Scapens & Chunlei Yang, conceptualises the theoretical link between platforms and morality drawing on an interpretive study of a hotel in Vietnam to examine surveillance.

Revisiting “Leapfrogging” in a Platformised World

11 January 2021 Leave a comment

What difference do digital platforms make to the long-standing argument about “leapfrogging” of development by developing countries?[1]

The idea that latecomer nations could accelerate their passage through development stages via use of new technology has been around for decades[2].  It was no surprise, then, that leapfrogging played at least some part in turn-of-the-century cheerleading for the role that ICTs could play in development[3].  And statistics bore out the concrete example of global South countries jumping fairly quickly to mobile phone-based telecommunications infrastructure during the 2000s and 2010s, having invested much less in relative terms in the previous generation of landline infrastructure than countries in the global North[4].

The flaw in much of the simplistic thinking about technology and leapfrogging is that technology never acts alone in development; it always forms part of a socio-technical system[5].  Lower-income countries might be able to move more quickly than higher-income countries to a more-recent generation of technology.  But they could not repeat the same trick with the social part of their systems.

One way of understanding why the “social part of their systems” constrained development was to identify institutional shortcomings – often called “institutional voids” – that particularly meant developing country markets could be inefficient, ineffective, incomplete and/or inequitable.  While ICTs always had institutional effects, these were limited, with lack of institutional change acting as the brake that prevented economic leapfrogging.

In the past few years, though, this picture has changed with the arrival of digital platforms as an important force in development.  Digital platforms much more readily fill institutional voids than prior ICT-based systems.  They not only provide cheaper and better information, they form the entire institutional infrastructure for new markets; not just the transactional infrastructure but the regulatory infrastructure as well[6].

So digital platforms, being much more complete socio-technical systems than earlier ICTs, can offer developing countries a route for leapfrogging.  Yes, local context matters and platform implementation can be a bumpy road so a platform is not quite “market in a box”.  But, for example, e-hailing platforms have helped dozens of Southern cities quickly improve taxi markets that were beset by insecurity, high costs, long wait times, etc – problems that had existed for years without resolution.

But if leapfrogging, at least in terms of some markets, is now more feasible; exactly what are developing countries leapfrogging to?  The new platform-based markets are more efficient, safer, with less opportunistic behaviour.  But they are also more unequal and less democratic as the platform becomes marketplace, manager, adjudicator, enforcer and regulator all rolled into one; eliminating roles for government, unions, and other stakeholders[7].

Platforms may be offering an opportunity for leapfrogging but they come with a caveat: be careful where you leap.


[1] With acknowledgements to Anne Njathi for asking the questions about leapfrogging that led to this post.

[2] See e.g. Goldschmidt, A. (1962) Technology in emerging countries. Technology and Culture, 3(4), 581-600.

[3] See e.g. World Bank (1998) World Development Report, World Bank, Washington, DC; InfoDev (2000) The Networking Revolution: Opportunities and Challenges for Developing Countries, World Bank, Washington, DC; Steinmueller, W. E. (2001) ICTs and the possibilities for leapfrogging by developing countries. International Labour Review, 140, 193.

[4] UNCTAD (2018) Leapfrogging: Look Before You Leap, UNCTAD, Geneva.

[5] See e.g. Wade, R.H. (2002) ‘Bridging the digital divide: new route to development or new form of dependency?’, Global Governance, 8, 443-466; Alzouma, G. (2005) Myths of digital technology in Africa: Leapfrogging development?. Global Media and Communication, 1(3), 339-356; Kenny, C. (2006) Overselling the Web?: Development and the Internet, Lynne Reiner Publishers, Boulder, CO

[6] Heeks, R., Eskelund, K., Gomez-Morantes, J.E., Malik, F. & Nicholson, B. (2020) Digital Labour Platforms in the Global South: Filling or Creating Institutional Voids?, GDI Digital Development Working Paper no.86, University of Manchester, UK

[7] Heeks, R., Eskelund, K., Gomez-Morantes, J.E., Malik, F. & Nicholson, B. (2020) Digital Labour Platforms in the Global South: Filling or Creating Institutional Voids?, GDI Digital Development Working Paper no.86, University of Manchester, UK

Ride-hailing Platform Asymmetries between Riders and Driver-partners in Lagos, Nigeria.

Platform companies, with the help of data, have the potential to formalise the processes of transport systems in global South cities, especially in African cities which are characterised with informal processes. For ride-hailing platforms, this will help improve safety and security for both drivers and riders and reduce the likelihood of workers who attempt to evade formal processes such as tax payments because information is accurately recorded and managed by algorithms. In our contemporary world today, data is important for several tech platforms including Uber, Airbnb and social media platforms. This process is known as datafication, which is defined as a significant feature of modern social life and society through “the drive to turn vast amounts of activity and human behaviour into data points that can be tracked, collected and analysed”1. However, there have been growing concerns about its impacts on society and user-groups at large – in this case, on platform workers/drivers in Lagos.

Registration on platforms like Uber and Bolt (Taxify) is asymmetrical for both workers and riders in Lagos. For workers, it is a stringent process which involves them providing critical details such as home address (which can be verified), vehicle details (plate numbers and vehicle numbers), licenses and at least two guarantors. For riders, registration on the platform is as simple as inputting a contact number, card details and home addresses (which cannot be verified). This has an implication on drivers’ safety, work ethic and motivation because they feel unequally treated. When data is not being equally represented on the platforms, it puts riders and platform companies in a greater position of power. Talking about drivers’ challenges, platform driver and Union president stated that:

Box 1 – Data misrepresentation
“To this present time we have 30 -35 of drivers been killed by riders because they don’t profile them well, many riders don’t use their correct names and don’t put correct information and they are collecting cars and killing people and that’s why we need government to regulate things, to open an account. Either you use BVN or use national ID or migrate their information with the road safety (use the driver’s license), so they are can know the perpetrator of these evil acts”2.

From observation, a rider can register with many accounts in search of trip discounts/bonuses or in rare instances when they may have been blocked by the platform. This makes it difficult to track riders who may have defaulted. It takes a 4.6/5 and 4.5/5-star rating for drivers to be blocked on Uber and Bolt respectively in Lagos, but until summer of 2019, there were no clear rating thresholds to discourage bad rider behaviours3. This has however not been observed in Lagos, especially on the Bolt platform, indicating a low barrier of entry and further perpetuating bad rider behaviours which demotivates drivers from working. Mr AY’s suggestion could be helpful in ensuring that riders are more accountable on platforms such that they are equally aware that bad behaviours cannot be tolerated.

The communication between platform companies and drivers in comparison to riders is also perceived as unfair to drivers, particularly during a conflict with a rider; algorithmic misinterpretation or network issue which can lead to an undercharged fare or overcharged fare especially on the Bolt platform (see figure 1); or drivers who are blocked without any clear explanation (see box 2). However, drivers highlighted that Uber is more organised and, in many cases, are more likely to reimburse drivers that may have been undercharged. This is hardly the case on the Bolt platform.

Figure 1: Undercharged fare for a Bolt trip
Source: Nigerian Platform drivers forum.
Box 2 – Poor driver relations and algorithmic misinterpretation
“…When I do fare review on Bolt, it takes them years to get back to me. Some riders will pay you that N500 (£1.1); some will tell you that it is promo and there is nothing you can do (for example see figure 1) …They have bad customer relations in our case. They would not check properly when there is a complaint from a rider but be so quick to block drivers. But in a reverse scenario, platforms respond quickly to riders” 4.
 
“The way they block drivers is something else, although some of our drivers are also funny too. But they should look at the history of the driver. Possibly, the driver might not be the issue, but you can call the driver and talk to the person…”. To summarise, While Uber does a good job sometimes in communicating and resolving issues, Mr Raz, went ahead to state how a rider reported him for being cheated for a trip which was originally N400 (£0.8), but the rider went to multiple destinations which was not accounted for. When he reported to Uber, only a fraction of his complaints was resolved 5.

These asymmetries can be resolved if algorithmic processes are closely supervised and communicated to drivers to ensure clarity. As Mr Raz advocates “… sometimes we need to interface more apart from texting on the app. The human angle should come in”. While it is a business that benefits massively from riders, drivers are equally important and should be treated fairly. The future of work hinges on the efficiency and transparency of platforms that might ensure that its processes are clear enough to create a fair working environment for its workers while meeting the needs of its customers.

References.

  1. Dencik, L., Jansen, F., Meltcafe, P. (2019). A conceptual framework for approaching social justice in an age of datafication.
  2. Fieldwork Interview with Platform Union President in Lagos Mr Ay, 2018
  3. Paul, K. (2019). Uber to ban riders with low ratings: will you pass the test? The Guardian. 1 June
  4. Fieldwork Interview with Platform Worker Mr Ed, 2019
  5. Fieldwork Interview with Platform Worker Mr Raz, 2018

Financial Inclusion and Institutional Voids: Are Digital Platforms a Solution?

2 September 2019 1 comment

“What drives development” has long been a fundamental question for many scholars and policymakers. One consensus reached is that financial inclusion – access to and use of formal financial services by all members of an economy – is a central tenet of development [1]. It facilitates efficient allocation of productive resources by reducing the volume of money outside the banking sector, i.e. by shrinking the informal sector [2]. Conversely, exclusion from the formal financial system reinforces social inequalities and deepens poverty.

However, the World Bank’s (2017) Global Findex Database indicates that about 1.7 billion adults across the world are still unbanked and therefore they are excluded from the formal financial system (see figure below). Evidence further indicates that almost all the unbanked population lives in developing countries and nearly half of these live in just seven countries: Bangladesh, China, India, Indonesia, Mexico, Nigeria and Pakistan.

But why are developing countries the home for the unbanked? In order to answer this question, we first need to address the cause of market failures leading to exclusion in emerging markets; namely institutional voids.

Globally, 1.7 billion adults lack an account [Source: Global Findex database [1]. Note: Data are not displayed for economies where the share of adults without an account is 5 percent or less.

Institutional theory suggests that institutions shape the conditions that drive socio-economic development and the particular rules that actors follow within a given context [3]. As Scott (1995) points out, institutions are socially constructed and embedded structures that provide the rules and frameworks upon which societies operate. If these institutions are absent or weak, it can create institutional voids that impact economic growth and development [4,5].

Therefore, while every economy should have a range of institutions (e.g. payment processing systems, contract enforcement, etc.) to support financial inclusion, many developing countries fall short. Thus, it is lack of, or weak institutional frameworks, i.e. institutional voids, in developing countries that differentiate them to a great degree from developed countries. The presence of institutional voids is apparent in the inefficiency of the formal financial systems to provide appropriate services, quality of institutions and legal origins [6]. Such institutional voids cause buyers and sellers to experience information asymmetries and uncertainty, thus creating serious operating challenges and higher transaction costs (i.e. the cost of capital) in emerging markets. All these act to constrain financial inclusion, and in effect hamper prosperity and wealth creation.

Digital platforms, which have rapidly grown in number and reach in developing countries, have the potential to generate social and economic value by filling the voids and thus building well-functioning markets. For instance, digital platforms for financial services can enable individuals and businesses to more easily reach and find previously hard-to-locate financial services. They also have the potential to facilitate the accumulation of capital by lowering search and transaction costs, reducing information asymmetries and thus fostering trust between parties [7].

Despite this recognition, however, the linkage between digital platforms and institutional voids in these contexts remains significantly underexplored. Apart from a few studies (e.g. [7]) that explored the importance of digital platforms in institutional development and capacity building in developing countries, the focus of the literature on digital platforms in emerging and transitioning economies has been mainly on the general functioning of digital platforms (e.g. business strategy, platform governance and consumer behaviour) [8]. Therefore, we need more research to better understand how digital platforms could help alleviate the negative impact of institutional voids in developing countries, such as in the banking and financial system.

References

[1] World Bank Group (2017). The Global Findex Database, Measuring Financial Inclusion and the Fintech Revolution. World Bank, Washington, DC.

[2] Sarma, M. & Pais, J. (2011). Financial inclusion and development. Journal of International Development, 23(5), 613-628.

[3] Acemoglu, D. & Robinson, J.A. (2012). Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Crown Books.

[4] Scott, W. R. (1995). Institutions and Organizations. Thousand Oaks, CA: Sage.

[5] Khanna, T., & Palepu, K. (2010). Winning in Emerging Markets. Harvard: Harvard Business Press.

[6] Zins, A. & Weill, L. (2016). The determinants of financial inclusion in Africa. Review of Development Finance, 6(1), 46-57.

[7] Drouillard, M. (2016). Addressing voids: How digital start-ups in Kenya create market infrastructure. In B. Ndemo & T. Weiss (Eds.), Digital Kenya: An Entrepreneurial Revolution in the Making(pp. 97–131). London: Palgrave Macmillan UK.

[8] Koskinen, K., Bonina, C., & Eaton, B. (2018).Digital Platforms in the Global South: Foundations and Research Agenda, Working Paper no.8Manchester, UK: Centre for Development Informatics, University of Manchester.

Trust Issues and Ride-Hailing Platforms in Lagos, Nigeria.

The idea of building trust is often central to the adoption and use of technology platforms in general such that the processes and governance of these platforms ought to align with the realities of user-groups which are essential for a seamless service. Since 2013, the entry of ride-hailing platforms in Nigeria has increased because of an overall technology awareness in Lagos and continuous successes of existing ride-hailing companies such as Uber and Taxify (see Table 1). Ease of access, trip predictability and ease of fare calculations and payment, amongst other things have improved.

Despite its growing impact on urban transport in Nigeria, the industry has suffered several challenges such as insecurity and lack of safety for user-groups. Prior to ride-hailing platforms, the notion of trust has been integral for taxi businesses or technologies to thrive. For instance, a passenger who builds a bond with a local taxi driver such that the driver runs personal errands such as dropping off school kids.

Trust in simple terms is the belief in the ability of someone or something. There has been increasing interest in the concept of trust in online transactions since the development of the internet and e-commerce in the early 1990s (1). The concept of ‘trust’ encapsulates both offline environments and online environments such that the difference lies in the varying characteristics of these environments as well as the context in which trust is formed and maintained. In technology, “it is a belief that a specific technology has the attributes necessary to perform as expected in a given situation in which negative consequences are possible” (2).Risks and uncertainties are exacerbated because users lack total control of the processes governing ride-hailing apps.

Table 1: Ride-hailing companies in Lagos
Source: Author’s fieldwork

In the ride-hailing industry in Lagos, both drivers and passengers are aware of the risk in engaging with a complete stranger via an app which is monitored by platform companies through data analytics and algorithms. Unlike the conventional taxi industry, user-groups often build trust in platform companies based on the efficiency and reliability of their apps over time. For example, Mr Ayo, the Taxify driver has just accepted his first trip for the day, but later declines because the rider would only pay via an ‘online bank transfer’ and from experience, the driver does not trust this process because it is often a fraudulent tactic used by riders without money. Using a third-party banking app to make a transfer to the driver’s account gives the rider more power in this situation because the payment could be reversed in 24 hours if reported by the rider. If it were a card-paid trip, the driver would feel safer because the ride-hailing app acts as an intermediary between both parties such that if a conflict occurs, it can be resolved amicably.

One of the many instances where the rider loses trust is through trip manipulations by drivers.  Since Uber slashed the base fare of trips by 40% in Lagos, drivers have reacted with strategies for increasing the fare of trips through manipulative techniques (3). In 2017, Lockito, designed for testing geofencing-based apps, was being used in inflating fares by manipulating the distance of a trip.  For example, a trip that should be about 5.9km would be double the distance when the Lockito app is being used (see Figure 1).

Although drivers are responsible for altering the GPS function in the Uber app, riders become aware that the app is also vulnerable to fraudulent activities. Riders frequently monitor the Uber app, drivers’ behaviour and prefer cash payments to card payments to avoid being defrauded during trips. Although there are other factors involved such as low smartphone and card penetration overall (4), the psychological construct of trust remains central to the reliability and predictability of drivers, riders, and the algorithms behind ride-hailing apps.

Figure 1: Incorrect GPS reading vs correct GPS reading
Source: BrandSpurNG (2017)

Regardless of ride-hailing platforms’ success in Nigeria, trust issues surrounding usability and culture remain a stumbling block especially for indigenous start-ups like Oga-Taxi. More research would be needed to understand the implications on user behaviour and what coping strategies are needed to thrive in an increasingly ‘networked’ environment as well as how these strategies may create new realities in the global South.

References.

  1. Li, F., Pieńkowski, D., van Moorsel, A. & Smith, C. (2012). A Holistic Framework for Trust in Online Transactions. International Journal of Management Reviews, 14(1), pp. 85-103
  2. McKnight, D. G., Carter, M., Thatcher, J.B., & Clay, P.F. (2011). Trust in a specific technology: An investigation of its components and measures. ACM Transactions on Management Information Systems, 2(2), pp. 12 – 32.
  3. Adegoke, Y. (2017). Uber drivers in Lagos are using a fake GPS app to inflate rider fares, Quartz Africa, 13 Nov
  4. appsafrica (2015). Can Uber really work in Lagos, Nigeria? appsafrica, 2 Jun
  5. BrandSpurNG (2017). Uber Drivers In Lagos Using Fake GPS App To Inflate Fares – Report, Nairaland Forum, 14 Nov
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